Page 6 - NorthAmOil week 23

NorthAmOil COMMENTARY NorthAmOil
Permian drillers grapple with gas glut
Drillers in the Permian Basin are dealing with a ood of associated natural gas production, and aring has hit new record highs, writes Anna Kachkova
PERMIAN BASIN
WHAT:
Producers in the Permian Basin are looking for ways to deal with their glut of natural gas.
WHY:
The basin is short on gas takeaway capacity, with regional gas prices falling to record negative levels this year.
WHAT NEXT:
Shale EOR using gas injection will become increasingly popular but will not provide immediate relief.
THE aring of associated natural gas production in the Permian Basin, spanning West Texas and southeast New Mexico, is hitting new highs, as drillers in the region struggle to deal with a glut of the resource and a shortage of takeaway capac- ity. Oil continues to be the primary focus for the Permian’s producers, but the boom in the basin’s output has also catapulted it into second place for shale gas production nationally a er the Appala- chian Basin. Without su cient takeaway capac- ity, regional gas prices have become so depressed that they have fallen to record negative levels this year. As a result, in some cases producers have had to resort to paying to have their excess gas output taken away. Now, the industry is trying to come up with new ways to address the gas glut and drive prices back up.
New highs
Consultancy Rystad Energy reported last week that venting and aring of gas in the Permian had hit a new high of 661 mmcf (18.7 mcm) per day on average in the rst quarter of 2019. is was attributed to an unexpected outage on a major pipeline in the region, as well as to the ongoing infrastructure shortages. The figure is a dra- matic increase from just 18 mmcf (509,760 cubic metres) per day ared and vented in the region in the rst quarter of 2011. Rystad also noted that in comparison, the most productive gas facility in the US Gulf of Mexico, Royal Dutch Shell’s Mars- Ursa project, produces roughly 260-270 mmcf
(7.4-7.6 mcm) per day of gross gas. is equates to around 40% of the amount of gas now being ared and vented daily in the Permian. And as well as having negative economic implications – as the gas is not being monetised – the rise in aring is leading to concerns over its environ- mental impact.
“We anticipate that basin-wide aring will stay above 650 mmcf [18.4 mcm] per day before the Gulf Coast Express pipeline comes online in the second half of 2019,” Rystad’s head of shale research, Artem Abramov, said in a statement.
Indeed, the growing glut of gas has spurred pipeline operators to propose new takeaway capacity. Just last week, a partnership compris- ing MPLX, WhiteWater Midstream and a joint venture between Stonepeak Infrastructure Part- ners and West Texas Gas made a nal investment decision (FID) on the Whistler pipeline. e pipeline will carry 2 bcf (56.6 mcm) per day of gas from the Waha Hub in the Permian to the Agua Dulce Hub in South Texas and is antici- pated to enter service in the second half of 2021. (See: Joint venture to proceed with Whistler gas pipeline, page 9)
is is the third major gas pipeline project to be sanctioned in recent years, a er two Kinder Morgan-led ventures – Gulf Coast Express and the Permian Highway Pipeline, which is due to come online in October 2020. Each of these pipelines are also set to carry about 2 bcf per day of gas from the Permian Basin. And in April it
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w w w . N E W S B A S E . c o m Week 23 13•June•2019